Support

A cookie is a piece of data stored by your browser or device that helps websites like this one recognize return visitors. We use cookies to give you the best experience on BNA.com. Some cookies are also necessary for the technical operation of our website. If you continue browsing, you agree to this site’s use of cookies.

Marketing Services

Bloomberg Next marketing services allow clients to elevate their brands and extend their reach through our established and trusted expertise, enhanced with engaging event production, appealing design, and compelling messaging.

Weekly Round-Up: The Aftermath of the Gillette Decision

Bloomberg BNA Tax Law Editor Erin McManus, in this week’s issue of the Weekly State Tax Report, takes a closer look at the impact of Gillette Co. v. Franchise Tax Board, No. A130803 (Cal. Ct. App. July 24, 2012), a major decision coming out of California that surprised many state tax professionals, and the effect of the decision on other states. Click here to read the article in its entirety.

In Gillette, the California Court of Appeal held that the legislature could not override and eliminate the Multistate Tax Compact section that allowed taxpayers to elect to allocate and apportion their multistate income in accordance with the compact or in a manner provided by the state.

The decision comes after several years of movement by California, along with several other compact member states, away from the uniformity originally intended in the formation of the compact.

Michael Herbert, a tax partner in PricewaterhouseCoopers' State and Local Tax practice in San Francisco, and Steve Danowitz, a partner in Ernst & Young's Los Angeles office, both told Bloomberg BNA that the FTB was likely to appeal the decision.

In regard to the possible outcome of an appeal, Herbert noted that the court ruled against the FTB on three grounds and the FTB will have to overcome all of them.

First, the compact is a binding agreement among sovereign signatory states that California cannot unilaterally alter or amend, he said.

Second, the state cannot impair contracts under either the state or federal constitution.

Third, the purported change runs afoul of the California constitution's reenactment rule, which is intended to prevent implied repeal of sections, according to Herbert.

Herbert also observed that “the federal impairment ruling gives taxpayers a viable basis to take this to the U.S. Supreme Court, if needed.”

Danowitz told Bloomberg BNA that “pending appeal, the FTB likely would not issue any refunds for claims based on the equally weighted apportionment formula until the appeals process was exhausted.” Nevertheless, he noted that taxpayers that “can benefit from the use of equal weighting should consider filing refund claims.”

All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.

Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)

Notify me when updates are available (No standing order will be created).

This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.

Put me on standing order

Notify me when new releases are available (no standing order will be created)